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Beware the legal outsourcing second wave, junior City lawyers

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What comes after the pandemic may not be good for MoneyLaw salaries

The first wave of legal outsourcing, which swept the legal profession in the wake of the 2008 financial crisis, seems almost quaint now.

Newly cash-strapped corporate law firms, to which the dream of globalisation remained largely unsullied, resolved to prop up profit per equity partner (PEP) by sending London junior lawyer work to ‘legal process outsourcing’ (LPO) centres overseas. Countries with lower living costs and high levels of fluency in English, such India and the Philippines, became LPO hotspots.

The magic circle jumped on the bandwagon and everyone else followed. We were experiencing a “paradigm shift” which would consign UK-based junior lawyers to extinction and elevate lawyers in these emerging jurisdictions, legal commentators swiftly concluded.

Such were the levels of money flowing into the LPO industry at the time that in 2010 one of these companies paid for me and other journalists to go on a five-star jolly to Noida, the fast-growing New Delhi suburb that had become the heart of much of this action.

On the first day we were brought to the LPO centre apparently used by our host to handle the work of dozens of global law firms. Traffic of a density and variety none of us had previously experienced meant we arrived over an hour late. The tired-looking LPO workers confirmed that what we’d experienced was a daily blight which made commute times unpredictable. A new state of the art metro system set to be introduced at an unspecified date in the future would solve this, our host assured us. The staff — mainly Indian law grads who’d missed out training contracts at local firms and were now working shifts to fit in with UK and US time while looking for other opportunities — shrugged as they weren’t planning to hang around.

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This isn’t going to work, me and my travel companions concluded.

Over the next few years we were proved right, as LPO part-faded away and part-morphed into ‘northshoring’ back-office and paralegal work to support hubs in the UK regions. Meanwhile, law firms — whose financial performance recovered but remained muted — found a new saviour in legal tech, which quickly became the next big thing.

Now, though, in the post-Covid world, with law firms once again in search of medicine to boost recession-hit PEP, and legal tech pivoting away from dodgy AI towards law firm Zoom and Teams subscriptions, conditions seem ripe for a legal outsourcing comeback — albeit of a new variety.

Lessons will be learned about timezones and other practicalities. Physical office space will be less important. There is also likely to be an attempt to move up the value chain. Are London-based associates earning hundreds of thousands of pounds a year really better lawyers than their far less generously remunerated counterparts in Leeds, Belfast, Warsaw and Cape Town? If the answer to this question is no, then new societal acceptance of working from home means law firms suddenly have a much larger pool of talent to draw from and a clear path to reducing costs.

In such an environment the law firm pyramid structure would be expected to narrow yet further. Associates on MoneyLaw salaries at elite law firms in the Square Mile would start to look particularly vulnerable.

As I learned in 2010, trends don’t always play out the way people expect. Still, if I was in the shoes of today’s big-earning associates I’d either be making sure I was on the partner track or be giving serious thought to putting my savings towards a hefty deposit on a farmhouse in the Scottish Highlands with an excellent broadband connection.

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42 Comments

Yeah but

I bet LPO lawyers have sh*t chat. And genuinely don’t underestimate that in an industry where networking is a large chunk of the job as your career progresses.

(16)(1)

anon

You’re assuming today’s partners care about cultivating tomorrow’s partners.

Some do, but plenty more would be happy to hire remote working juniors at knockdown rates for a few years, hoard the PEP and then f**k off into the sunset.

This is even worse at firms still operating a lockstep, where the most powerful partners are unavoidably those with the shortest term personal interest.

(14)(0)

Anon

This seems to be based In part on a false premise. There is not a set of “London lawyers” and separate sets of “Leeds lawyers” who will simply work for less. At the moment the best law grads move to London (from Leeds etc) to work there because the best firms are located there and that is where their job requires them to live. If firms decide not to have physical offices they won’t suddenly hire less people from London. Less people will move to London.

(33)(2)

R. Baratheon LLM

Fewer

(52)(4)

Bracewell NQ

Shaking in my books rn.

(0)(2)

truthsiren

Lmao p*ss off sockpuppet

(0)(0)

Jaded mid level

The advice to pile up money is very sensible regardless of what happens. It’s been interesting to observe my colleagues (and me) become increasingly jaded and realise that city law is, in many ways, a horrible career. What you don’t want to be is the mug at 3/4 PQE who has saved virtually nothing or has 10% equity in their 400k Peckham box flat and has limited scope to leave it all behind whilst still having a decent house/lifestyle. Save hard and you can walk away from it all in your late 20s with a few hundred thousand and a much easier rest of life if you want to.

(19)(3)

anon

Few hundred thousand late 20s…that is only just about going to be possible if you qualify at a top paying US firm at 24/25 and save hard.

(27)(2)

Good Game

Saving hard and working big firm hours in your 20s is a recipe for burn out – by all means you should be putting a decent amount aside each month into low fee tracker funds and your ISA – but if you’re squirrelling everything away then you’ll really hate your life. The main benefit of the last few years for me has been using my salary to help me travel the world, can’t imagine working this hard without any release, whether you love travel, clothes, cars, whatever your vice is!

(27)(4)

Anon

^ a common view, which almost inevitably leads to people getting trapped by the golden handcuffs. It’s a rare associate who once they’ve started leading that type of lifestyle is able to give it up. Firms are full of miserable senior associates who made that mistake. If you think naked consumerism and “finding yourself” on a 5k holiday is the route to happiness you’re in for an unfortunate surprise down the line.

(28)(2)

Good Game

Not sure why going to new places and experiencing new cultures has to be sneered at – and who said I was spending £5k a time on them? I used cars and clothes as examples as not everyone likes travel – my point is that you *should* save money, but don’t do an all nighter at the office and then eat Tesco Value noodles at home, that’s unsustainable. If you can succeed whilst doing things you enjoy, then there are no ‘golden handcuffs’!

(20)(17)

.

Is it a bad idea to spend majority of savings on a property in London as a junior lawyer?

(0)(1)

J

Depends on whether it is on rent or a mortgage?…

(0)(0)

Anon

If the choice is rent or own, then obviously own. You’re better having 3/5 of your biggest expense every month going into your asset rather than someone else’s.

When it comes to deciding whether to overpay the mortgage, put more into deposit etc. that’s really a personal choice. Obviously it reduces money lost to interest, but it puts it into a relatively illiquid and, currently, low growth asset.

Personally, I’d pay the mortgage then put savings into a mix of government bonds, corporate bonds, blue chip stocks and high growth stocks, but it’s your choice in the end.

(1)(0)

Terrence

Are you speaking from experience or is it just an opinion on what you think someone should do?

Ed W

What area in London is even worth buying your first property in?

Adam

No offence but why would you wanna buy in London? Anywhere nice in London is close to £1million but for that same amount you can get a nice detached 5 bed house with no neighbours somewhere in Kent/Surrey etc with a decent commute into London

(4)(4)

Anon

Perhaps because living in one of the world’s great cities with millions of young people is preferable to being stuck in the arse end of Kent 1.5 miles from the nearest Spar and living next door to Keith Gammon, local builder turned second rate property developer, and his former hairdresser wife Sandra.

Alex

To Penge with you sir, to Penge.

Forever Associate

Buying in London is a risky situation at the moment and most lawyers will struggle to buy within Zone 4. London is becoming a renters’ city, with many reports expecting over 50% of all London residents to be renters by 2025. I don’t plan on buying in London until my post-tax income hits £200k pa, mostly because I value quality of life so don’t want to commute 45+ minutes each way every day.

However, a number of my colleagues purchased nest egg properties (mostly 2 or 3 bedroom flats) outside of London in popular towns when they qualified: Bath, Bristol, Oxford, Cambridge, Brighton, Edinburgh etc. Many of them had help from the parents for ~20% deposits so I acknowledge even this could be tough for London junior lawyers . Hell I can’t even do this yet and I’m just about 30. The properties were cheap enough to buy but because of the hot rental markets in those towns they made more than enough to cover the mortgage payments as well as more than half of their London rent. I plan on doing something similar once debt is cleared. Perhaps when there isn’t the need for renters to maintain mortgage payments and rent these would be nice weekend/COVID20 lockdown properties.

(4)(1)

William A

There are people in normal jobs and non professional jobs who end up with more savings than lawyers. The more you are paid the more you are likely to spend

(6)(0)

William

Also, trainees and associates at these firms are expected to live in zones 1-2 in London where most of their money is eaten away by the rent and cost of living there

(6)(1)

Lawyer

“ Are London-based associates earning hundreds of thousands of pounds a year really better lawyers than their far less generously remunerated counterparts in Leeds, Belfast…”

The answer to this is simply, yes. Lawyers in elite city firms who are working on ground breaking billion pound transactions, negotiating complex issues through the night, working across multiple jurisdictions and project managing huge projects and the signing of thousands of documents, have a far superior skill set than their 9-6.30 regional counterparts advising on the sale of a local SME. I expect this comment to be controversial but it’s the simple truth.

Are premier league football players better than division three players? Yes. You get paid big bucks for being able to deliver a high quality product and an against the odds service. You just don’t need to do that in the regions.

(27)(12)

Brent

You’re missing the point.

Up until now, the best lawyers have ended up in London because that’s where you needed to be in order to have a significant role to work on the biggest deals. But now the supply of lawyers able to work on top deals is going to increase, driving down salaries. The Oxford student who comes top in his year in Law but would hate to work in London and instead was planning on working at a regional firm can now work for a City firm, but from home.

You wouldn’t believe the amount of people who are far brighter than the current crop of City lawyers, but who are put off by the commute, the office politics, and most of all the state that London has become.

(21)(7)

Anon

I think you’re missing the point Brent. The best lawyers are not the brightest or those with the best grades, in fact often they are the opposite. The best lawyers aren’t afraid to get off the fence, take a commercial view, create on innovative solutions and see the bigger picture. You often find the Oxbridge first class degree person is obsessing over the black letter law when the client couldn’t care less

(17)(48)

Jaded

Very well said. The main reason so many Oxbridge lawyers have historically been in City firms is because going to Oxford and Cambridge was the same as getting into a top firm pre-2000, who you knew and who gave you a reference. Grades were not always that important. So you ended up with less academic Oxbridge grads who ironically were better commercial lawyers and had the contacts. Now Oxbridge has become an academic hot-house and a lot fairer, you’re ending up with a lot of people ill-suited to corporate/commercial practice. If you’re Oxbridge and don’t end up at the bar, become a litigator. As a corporate lawyer you are wasted, and your lack of social skills and obsession with typos will annoy everyone in your team and on the transaction.

(10)(44)

Ox Fox

So much to unpack here. Oxbridge was not less academic pre 2000, and standards of teaching there are completely unaffected by what’s happening in the City. To be blunt, the tutors don’t give a shit about City firms, save for some consultancy and speaking engagement pocket money. Tutors are usually disappointed you’ve gone into City law, instead of becoming an academic, which is what Oxbridge trains you for. Also “less academic Oxbridge grads”? LOL. ALL of them are very academic. And poor social skills? Nah mate, clever people are more likely to be funny, engaging and socially smart. Which college rejected you?

Typos are bad

Not that we are painting with broad brushstrokes in any way…all Oxbridge lawyers are obsessed with typos, really?! And I say that as a non-Oxbridge grad…

Jaded

Ox Fox, why would I have a chip on my shoulder when I said clearly Oxford has become a lot fairer in terms of entry since 2000, which would include me, and the entire system is far more meritocratic?

Also there are Oxbridge grads pre-2000 who are not too sharp. An ex girlfriend’s dad went to Cambridge in the 70s because his tutor in his public school put in a call for him. I heard the same story from a guy on my masters course who was a lot older and went to Dulwich in the 90s. I have also worked with partners who are very slow but posh, privately educated and have BAs in Classics or French from Oxford. Many of them were mediocre and ended up there not on merit.

A law firm is not a literary society nor is it a drinking club. It is a commercial environment. My best trainees have been from Exeter, Leeds and UCL. Bright kids with high EQs as well as IQs. Yes they know less about depression era American literature than the average Oxbridge grad, but they have been technically acceptable and can be trusted to be left with the Sales Director of a key client for an hour at the bar without name dropping their college and making the man feel like an idiot. If by social smarts you mean being able to get along with people just like yourself, then i’m sure Oxbridge grads do very well.

Anon

Hi Jaded, you are very insecure and speaking nonsense.

Anon

I think this rather assumes we’re talking about “corporate law” or finance. There are lots of other different types of lawyer.

What about litigators, and specialists in areas such as tax, pensions, employment, IP, property/planning, and so on?

How do you assess the quality of their lawyering skills? Purely client satisfaction? Number of PI claims per hundred lawyers? Fees billed? Average lawyer turnover rate in a department/firm? Number of pro bono / community investment hours? Percentage of ‘home grown’ partners?

I guess it all depends on who is asking.

(0)(1)

Anonymous

“Indian law grads who’d missed out training contracts at local firms”

I mean, the site loses a lot of credibility when basic things aren’t fact checked. Indian law firms don’t have training contracts – it’s similar to the US system, where you’re a qualified lawyer straight out of university provided that you pass the bar exam.

Be better.

(15)(4)

Warren

They just wanted to make a point of it out of sheer bitterness. If we’re being honest a lot of these white brits hate ‘outsiders’ especially in commercial/corporate law

(7)(4)

G. Maxwell

A lot of lawyers at regional offices of international firms (Manchester, Leeds etc) are actually really good!

Just a shame they get shafted financially.

(19)(26)

TMF

I’m not sure they get shafted. Apprentices and trainees I’ve spoken to at Eversheds/AG etc up north really enjoy it and aren’t tempted by the salary jump for London owing to the cost of living – also many are from the surrounding areas and prefer staying local. They’ll buy houses before we do in any case!

(5)(1)

RegionalLivesMatter

Agreed with G.

45k NQ wage in the regions is not equivalent to 85k in London in the same firm’s London office. Especially when corporate hours are almost very similar regardless of location.

It should be £55k at least.

(5)(7)

Real

They don’t get shafted. They are paid in accordance with their ability and professional standing.

(27)(1)

Anon

Freshfields 84% retention rate. Bit meh.

(2)(0)

MoneyLaw

Well written Alex. Some of my friends and colleagues have already been axed. Sad indeed.

“Associates on MoneyLaw salaries at elite law firms in the Square Mile would start to look particularly vulnerable.”

(0)(0)

Forever Associate

This article is interesting. I agree that there is likely going to be a new trend that promises cost savings and higher profit margins for private practice lawyers. However, Covid is just one of many catalysts that could shape the next decade or more of the profession in the UK.

You have the SQE that is going to move the bottleneck from securing the TC to securing NQ roles at lower-to-mid tier firms; you have more firms of all types picking up their own advocacy capabilities with solicitor advocates and employed barristers; you have the continued tech push that will not go away (smart document management and document automation is still the pursuit); the continued push for major commercial clients to handle more legal work through their in-house counsel; devaluing traditional bread and butter lawyer work eg. conveyancing and personal injury work being ran almost exclusively by Cilex, paralegals, claims handlers and licensed conveyancers; insurers who give out a massive amount of work to big City firms continuing to demand more “value added” services for free and insultingly low billable rates to be on their panels; the general outlook that profitability requires firms moving to a niche practice and individual lawyers specialising at a much earlier stage in their career. Now you have proof that 99% of fee earners’ work can be done remotely assuming your firm can afford the IT solutions.

Yet somehow, UK private practice continues to be a conservative profession entrenched in tradition, nepotism and virtue signalling. Recruiters add more value to 2:1 BA History (Oxon) than 1st LLB (Hons) from decent Plate Glass/Civic/Red Brick uni’s as they think clients will like the initials more. 6 months to 1 year fee earning paralegal experience is worth less than a 2 week vac scheme and open day. Wear brown shoes in the office? Enjoy never being on a client conference call ever again. How these, and many other intricacies, have survived the immense changes seen between 2008 and now absolutely astounds me. But it also makes me think that the article’s author underestimates the resilience (well, unreasonable stubbornness is more accurate) of the legal profession.

(3)(13)

Anon

“Recruiters add more value to 2:1 BA History (Oxon) than 1st LLB (Hons) from decent Plate Glass/Civic/Red Brick uni’s as they think clients will like the initials more.”

It’s because someone with an Oxbridge 2.1 is brighter and better educated than someone with a non-Oxbridge 1st.

(37)(3)

Get a life

Spamming your like button are ya anon hahahaa

(0)(3)

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